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Harneys acts in Monarch Pointe litigation

1 December 2012

Harneys acted for the applicants in the recent seminal decision of Somers Dublin and others v Monarch Pointe Fund Limited BVIHCV 2008/97, where the BVI Commercial Division considered a key unresolved issue of BVI insolvency law: in a liquidation, where do redeemed members with claims based on unpaid redemption proceeds rank as against continuing members?
Bannister J. held that the redeemed members were to be paid pari passu with non-redeemed members. This decision was eagerly awaited by the funds industry in the BVI and beyond, given the current unstable economic climate and number of ongoing and high-value BVI liquidations. Of great practical importance to investors and liquidators alike was Bannister J’s upholding of his earlier order, which provided for distributions to be made “…rateably between the continuing members and the redeemed members of the Fund, the Liquidator treating the continuing members as having a good claim for the subscription price paid for their shares in the Fund and the redeemed members as having a good claim for the redemption price due in respect of their shares in the Fund as set out in the Fund’s records.”
In reaching this conclusion Bannister J. treated unpaid redeeming members as creditors, but said that the earlier Court of Appeal decision in Westford Special Situations Fund v Barfield Nominees Limited did not mean that redeeming members took priority over continuing creditors, nor that they formed an additional class “floating uneasily” between external creditors and continuing members.
This important decision is currently under appeal to the ECSC Court of Appeal, and Harneys continues to act for the redeeming members on appeal. Further guidance is eagerly awaited.